Strategies for Enabling Multi-business Collaborative

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I J RMEC Volume2, Issue 11 (November- 2012) ISSN: 2250-057X

International Journal of Research in Management, Economics and Commercewww.indusedu.org 433

STRATEGIES FOR ENABLING MULTI-BUSINESS COLLABORATIVE

S&OP PROCESS

Anshuk Pal ChaudhuriSteelwedge Technologies Pvt. Ltd, Hyderabad, India

ABSTRACT

Sales & Operation Planning (S&OP) is a process led by senior management that, on a monthly

basis, evaluates revised, time-phased projections for supply, demand, and resulting financials. It

is a decision making process that ensures that tactical plans in all business functions are aligned

and support the business plan. S&OP facilitates collaborative forecasting, demand and supplyplanning, scenario planning, rough cut capacity planning and unconstrained demand

forecasting. An advanced S&OP process makes an organization more agile in dealing with

uncertainty and market volatility.

In today's world, S&OP process becomes even more challenging for multi-business unit/s

organizations. By multi-business organization, mean the structuring of a corporation into

modular business units (BUs) that are focused on particular products, customers, or

geographies. From a practical perspective, multi-business organization is widely acknowledged

to have been one of the most significant organizational innovations. S&OP solutions can be

working as separate instances on the respective business units, facilitating specific business unit

needs. At a corporate strategic level, it becomes very important to aggregate all the financial &

sales information across all the business units - to help in strategic decision making at the org.

level. In such scenarios, one of the key factors of S&OP process is to drive planning information

across multiple business units. In this white paper we will provide several practical strategies for

how to enable multi-business unit visibility and control as part of the S&OP process.

Keywords: Sales Operation & Planning, Business Analytics, Process, COE

1. INTRODUCTIONSales and operations planning(S&OP) is a collaborative process that aligns the supply side of an

organization with the demand side. Aligning the goals of the different departments eliminates the


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"silo" mentality and creates a streamlined organization. This streamlined organization works as

one team with the goal of meeting the financial expectations set by the executive team.

S&OP is a journey. Typically it begins with an improved demand signal to provide adequate

reaction time for shifting sales opportunities. The next stage connects and aligns demand, supply

and capacity plans for improved service levels as well as capital and production resource

utilization. The last stage extends the process to include key customers and suppliers and

provides executive "what if" scenario modeling for operational decision-making. With every step

in the journey, businesses gain more control and agility.

Fully-realized S&OP is being referred to by many as Integrated Business Planning. IBP takes

S&OP to another level, by integrating financial systems data into the equation. This brings

together strategic and operational planning for a single view from plan to performance to profit.

Figure 1 depicts an overall IBP cycle in todays industry environment.

Figure 1

2. BUSINESS CONTEXTThe next few sections would try to address the business context for this paper. The focus of this

section would be to define the context for multi-business organizations and the typical business

challenges faced while implementing S&OP solution/s across several heterogeneous units.


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2.1 Multi-Business OrganizationsThe task to deploy a global sales and operation planning cycle in an organization where there are

multiple plants functioning across multiple regions and serving numerous business units can be

challenging. In order to seamlessly integrate suppliers and customers into the global S&OP

process, improvement of the demand, inventory and supply planning processes would be

required.

It would be difficult only improving the individual demand planning, supplying planning, and

inventory planning processes for a single business unit or a single geographic region. It should

come as no surprise that integrating S&OP across a global, multiple plant, multiple business unit

organization could present significant challenges. A global S&OP initiative has implications that

are much more far reaching with respect to standardization, organizational structure, process

integration, and technology enablement. It is critical, therefore, to select a consulting services

provider experienced in all these facets of global S&OP implementation.

Benefits of a global S&OP process across cross-functional units in an organization can be

significant. Integrating multiple instances of S&OP processes in several business units, itself,

requires a robust & efficient orchestrated process.

2.2 Business ProblemMultiple business units in the same organization, even if equipped with complete separate (as per

their line of business) S&OP solutions, it becomes very important to know the financial aspects

at an enterprise level. Integrated Business Planning (IBP) should seek to make S&OP more

financially focused. S&OP solutions often claim that their solutions support IBP leading to

much confusion in the market about the significance of end-to-end integration.

Global S&OP is a major undertaking and involves alignment of both demand and supply side

organizations to properly support and execute the new processes. If I am finance head, I would

prefer questions answered at an enterprise macro-finance level. If demand and supply changes

are being recommended by the IBP solution, and it would be quite necessary for the same

solution to answer questions like - How will demand and supply changes affect my ability to

meet annual targets? To what extent will these changes affect my FX exposure? Do I need to

hedge my positions? What specific volume, mix, spending and productivity variances will be

incurred? Under what circumstances does the organization optimize profits and cash flow?


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All the above questions and more like them need to be answered at a global enterprise level.

When implementing Integrated Business Planning solution for an enterprise, organization heads

& executives obviously would require the basics, such as planning views, demand planning &

forecasting etc. Apart from these, they would look for capabilities like Complete P&L, balance

sheet and cash flow forecasts in total and by segment, Capacity constrained cash flow

forecasts, forward looking activity-based profits and process volume, etc.

For requirements mentioned above, the IBP solution needs to be agile & robust enough to handle

such financial aspects at an enterprise level which would tie multiple autonomous business units.

In the next few sections, this paper will try to define such complex business scenarios from

S&OP & IBP perspective, identify the necessary down-stream impact/challenges faced by

business folks at org. level - different cross-business unit reporting issues in S&OP world and

provide solution areas as well.

We will discuss few problem scenarios where in multiple business units are working under one

organization and how some the key questions are not being answered.

Scenario 1

A multi-national company working in two diversified units in manufacturing digital cameras &

providing software services is currently using a robust S&OP processes in both the business

hubs. The top management is able to align the supply & demand planning properly but not able

to be provided with key financial forecast & budgeting information at the organization level.

Financial budgeting and forecasting is an essential part of the business planning process.

Executives and managers continually revisit forecasts as actuals are reported to determine how

their business is performing relative to plan. Forecast reports allow detailed analysis by budget

owners at every level of the organization and set the stage for determining sources of revenue

and spending priorities. From simple reporting on actual performance versus budget to more

sophisticated what if scenario creation and predictive modeling, organizations use business

intelligence to make fact-based business plans and better monitor performance.

Below mentioned are the financial revenue & cost of both the units who work in silos

separate budget & contribution data provided.


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Figure 2

Figure 3

The key performance indicators required to understand at an organization level would be :

1. Forecasted Revenue2. Forecasted Expenses3. Forecasted Contribution Margin4. Revenue Probability5. Variance to Plan6. % of Compensation Target7. Top 5 Business Units8. Exceeding Plan9. Top 5 Salespeople by10.Forecasted Revenue

Below questions remain unanswered, even when S&OP process is being deployed for different

business units in different instances.

What is the variance between my revenue forecast, budget and compensation target by service

line?

How much revenue does each business unit expect to earn in the coming quarter?


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Which BU's forecasts are above corporate plan?

What is the variance between my forecast product revenue and my compensation target?

Does one unit predict significantly more or less revenue than last quarter? Why?

Which forecasts are more than 10% below expectations?

Which business units have historically performed 5% above or below plan?

Here the problem is, with S&OP processes, even functioning fine for every line of businesses,

still not able to answer many of the collaborative finance questions.

Scenario 2

A global car design, engineering and manufacturing having multiple merger and acquisitions was

finding it difficult to manage the sales & planning process need to provide a single system of

record to manage Executive Sales and Operations Planning (ES&OP) reporting and analytics. In

the current state a number of processes that support central planning are performed manually and

offline. Below is a summary list of issues in the current process:

Interfaces between various systems are all manual Planet system primarily works as a data repository with basic planning features missing Tools to improve forecasting, allocation planning etc are all off-line All reporting done manually using off-line data 12-24 Month planning horizon No workflow capabilitiesFigure 4 gives an idea about the current state of the process in the organization.

Figure 4


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3. S&OP CAPABILITIES & ENABLERSS&OP process is an integral component of an organizations supply chain planning process. An

ideal S&OP needs the right mix of factors across Process, Technology and Organization

dimensions. Due to its multi-faceted nature where it touches various stakeholders within the

organizations boundary, it throws up its own set of challenges; these challenges are around how

to make it implementable

3.1 ProcessS&OP process has to involve stakeholders from various departments such as Planning,

Manufacturing, Finance, Sales & Marketing and may be R&D/Product development, that too

from diversified business units. But, this may be far from reality in organizations, where

probably a couple of functions sit together in multiple discussions and agree on final plans and

this is what they call as S&OP. Many might disagree saying that it is not the right way to run

S&OP but it works and it works effectively within the organizational ecosystem

In some cases, demand and supply planning functions within the same business unit work in

silos but still S&OP exist in the organization. Such forms of S&OP where just Sales and

Demand planning finalize the demand plan and push it to Supply side, Many clients dont seem

to change it. For them, it is not practically feasible to include people from finance or product

development at this stage.

3.2 OrganizationCreating a strong institution for S&OP Planning is critical for the success of any S&OP

initiative. The foundation starts with clearly defined leadership at the highest level of the

organization. S&OP has a major impact across the whole enterprise. With any initiative of this

size and complexity, executive sponsorship/leadership is a must. In a few organizations, there is

a trend of S&OP process ownership being assigned to finance. With the continued emergence of

IBP as the key financial element of the S&OP process, financial executives are being asked to

step up to take the lead ownership role in S&OP; needless to mention that the finance executives

need to understand all the elements S&OP teams are being tasked to focus on areas such as cost

cutting, visibility (demand and cash), inventory optimization, value chain collaboration and

financial simulation (income statement, balance sheet, working capital). Scenario planning


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(what if planning) has become the norm in developing the long-term plan due to todays global

market dynamics.

3.3TechnologyUsing technology as part of S&OP process is one area that is still emerging to most of the

organizations. It is true that there is more relevant for organizations that have mature S&OP

processes, but leading organizations use simple excel capabilities to churn data, do lot of analysis

and throw insights that are really effective for decision making. They may not have sophisticated

what-if analysis capability but a smart blend of simple scenario planning with experience or gut-

feel is sufficient enough to get them going

Technology in S&OP plays a crucial role on two fronts, the S&OP process and S&OP

performance management.

Gartner technology maturity

Figure 5

Organizations need to answer few questions:

Where does our organization stand relative to S&OP technology?

If our organization is still using legacy techniques for S&OP planning, we are a generationbehind in the deployment of S&OP technology and the business processes associated with world

class S&OP. As IBP becomes more of a de-facto standard, are you risking a competitive

advantage in the marketplace?

Figure 7 depicts a holistic picture about the enablers.


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Figure 6

4. SOLUTION AREASAs mentioned in earlier sections, for the business case problems, this paper would be trying to

draw some strategies & approaches for the same, based on the industry wide S&OP capabilities

and enablers.

4.1 Strategies for Enabling S&OP Collaboration in Multi-Business UnitsAs S&OP is a multi-functional process by its very strategic nature, it lends itself to the multi-

enterprise nature of todays supply chains, particularly in the high-tech/electronics vertical.

Software tools are emerging that encourage and support the negotiation, compromise, and

consensus building necessary in a multi-function, multi-tier process like S&OP through the use

of scenario management and collaboration, including assumption capture.

The importance of cross-functional collaboration due to the importance of reaching consensus

despite competing goals and measures is depicted in Figure 7.

In todays outsourced supply chains, S&OP collaboration strategy need to include at least the

contract manufacturers. But with the ever-shortening product life cycles, how can the

engineering/research and development (R&D) departments be excluded from S&OP? With life


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cycles of cell phones reduced to six months or less, running a monthly S&OP cycle focused on a

618 month horizon seems pretty pointless.

The strategy for S&OP collaboration in multi-business units needs translation of corporate

business objectives, which are largely captured in the business planning or budgeting process,

into feasible tactical plans that can be executed at the plant or supply chain level. The time

horizon and granularity level at which S&OP is carried out will depend on the industry and

market.

Figure 7

Source: http://blog.kinaxis.com/wp-content/uploads/2011/03/TEC-blog-post-image-1.jpg

4.2 Cross-business unit S&OP collaboration for financial analyticsS&OP business data for different business units would be available in disparate sources and

system. Specialized analytical model for collecting data from different business units can be

designed to coagulate and slice & dice the data to provide visibility into business performance

from summaries down to the actual live transaction. It is important to note here that different

business units might have different hierarchies in S&OP context; the analytical model needs to

be designed in way to define the hierarchies which should be similar to all the necessary business

units.

Case Study

One of the organizations in chemical industry had requirement for cross instance reporting. Cross

Instance Reporting is to provide reporting from multiple business in a single place envelope.


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There were multiple S&OP solutions being deployed in different business unit instances. Certain

considerations needed to be in place for both the business units:

i. Hierarchies & time series have to be similarii. Certain unique keys for hierarchical attributes need to different for two instances

to avoid hierarchy conflicts/violation

iii. Data (/time series) consolidated has to be at same level (or will be stored at thelevel which is higher among the two instances)

iv. There will be no business rule calculations in the reporting instancev. This will be used only for reporting purpose Planning Templates, workflow,

planning engine etc., will not be configured

Certain options/approaches were evangelized, with necessary pros & cons:

1. Option 1: Use Unit 1 S&OP instance and Unit 2 S&OP instance as different instances andmigrate data of Unit1 instance to Unit2 instance for reporting purpose

Notes

a. No new instance for Cross Instance Reportingb. Create flags in each dataset to denote Unit 1 or Unit 2c. Use filters for planning in Unit1 to ignore Unit2 datad. Data size in Unit2 will increase and might lead to performance degradation

2. Option 2: Use Unit1 and Unit2 as different instances. Migrate required data of each instanceinto a third instance for reporting purpose

Notes

a. Global reporting independent of planning instancesb. Data to be reported (e.g., Level, Units Vs Rev) in the Cross Instance reporting needs

to be evaluated

c. Data will be extracted from each instance at pre-scheduled times from each instance,pre-processed as required to load into reporting instance

d. Pre-processing logic to be defined pre-implementatione. Reports have to be configured in the reporting instance and will not be extracted from

individual S&OP instances


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3. Option 3: OLAP based reporting architectureUse new reporting architecture to report from multiple instances

Use of Business Analytics

Full-fledged cube-based OLAP (On-Line Analytical Processing) BI solution that delivers

real-time, up-to-the-nanosecond data is almost a necessity for a company with numerous

divisions and databases and highly complex reporting requirements. An integrated analytics

solution would automates a businesss reporting processes, drawing data from the accounting

package, upon request, thereby eliminating manual report preparation and repetitive data

extracts, automating spreadsheets and providing with up-to-date, accurate and well-presented

reports for informed decision-making.

4.3 ApproachOne of the areas where finance heads/executives for different business units does have control

over is seeing the business side of sales and operational planning. For example, operations are

concerned with customer demand, capacities and constraints. Finance on the other hand sees the

same three areas as revenues, costs and profits. Finance can leverage their perspective and

translate it to show how demand, capacities and constraints impact corporate financial

performance of all business units.

Finance Teams can drive a collaborative S&OP process is to drive regular executive sales and

operational planning meeting w.r.t. financial budgeting & forecasting, overall cash flow analysis,

etc. The goal of each meeting is to define the sales and production plans for the coming months

by updating the prior months plan based on changes in the market place. One of the major goals

of the meeting can be the different capital expenditure budgeting impact/s on all the business

units for different products.

Leveraging performance management software to support the S&OP process can help align all

functional areas by providing visibility into the thinking behind the numbers. A fundamental key

of S&OP is that budgets and forecasts arent just numbers they represent all of the assumptions

people were making when they provided those numbers. These assumptions are as important as

the numbers themselves. Performance Management software documents the assumptions and

corresponding numbers in a single repository and provides a way to communicate the thought


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process used to develop the plan and delivers a Web-based mechanism for all functional areas to

see the status of what they projected versus reality.

4.4 Use of a Center of Excellence (COE)An S&OP COE is very common in large organizations. The role of the COE is to help the

business units & regions to improve their S&OP process for better performance & results.

COEs provide self-assessment tools, scorecards workbooks to support the process and identify

the need for improvement and maintenance. The business has to want help and pull COE

resources in. COE resources are too scarce to put effort into a group that is culturally not ready to

move forward.

5. CONCLUSIONS&OP is not just about the technology, process, organizational design, or data. It is also a

business transformation initiative and a highly people-oriented process. An S&OP initiative

brings together an organizations key functions, regions, and plants around a fully integrated

process. Many implementations fail due to impatience or lack of management commitment to

continuous improvement. Most elements of the sales and operations planning process already

exist; they just arent fully integrated and coordinated with sufficient collaboration,

documentation, accountability and management support. Companies that fail to obtain value

from the S&OP process typically dont spend enough time working the process to configure it to

their environment. Once some of the overall S&OP process is automated, companies realize

what S&OP really is and the implementation gains momentum and justifies the ongoing time

spent with further refinement.

REFERENCES[1] www.stratabridge.com/news/sept03_s_op_evolution.pdf

[2]www.deloitte.com/assets/Dcom-UnitedStates/Local

Content/Articles/Consulting/us_consulting_valuechainplanningsolutions.pdf

[3] Sales & Operations Planning: The "how-to" Handbook - Thomas F. Wallace - Google Books


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[4]www.bp-council.org/wp-

content/uploads/Papers_2007/published/Paper_A_Framework_for_a_successful_S_&_OP_Proce

ss.pdf

[5] What Constitutes Fully Integrated IBP?

http://deanbsorensen.wordpress.com/2012/07/04/what-constitutes-fully-integrated-ibp/

[6]http://www.riverlogic.com/2011/01/embedding-financials-into-sop/

[7] http://www.grayresearch.com/sopss_ch1.pdf

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